EchoStar Posts Sharp Decline in Q1 Profit

May 10, 2006  •  Post A Comment

EchoStar Communications reported first-quarter net income of $147.3 million, a 54 percent drop from a year ago, as a year-earlier gain and legal costs of a patent fight weighed on results.

The addition of 225,000 subscribers in the quarter triggered revenue to rise 13 percent to $2.3 billion, the Englewood, Colo.-based company said Wednesday in a filing with the Securities and Exchange Commission.

However, that was negated by a one-time insurance settlement gain of $134 million booked last year and a $74 million charge this year tied a patent fight with digital video recorder maker TiVo. EchoStar’s profit was 33 cents per share, compared with 70 cents a year ago, when the company reported net income of $317.5 million.

EchoStar’s results arrive at a time when competition between satellite and cable operators has never been more fierce. While EchoStar and rival DirecTV Group have enjoyed years of robust customer growth, largely at the expense of cable, customer additions are beginning to slow down, in part due to more formidable cable companies, which are offering packages of television, fast Internet and telephone and winning back customers.

That trend was apparent at EchoStar, which, while recording a gain in subscribers in the first quarter, saw the pace of growth ease. The addition of 225,000 new subscribers was off 31 percent from a year ago, when EchoStar added 325,000 new customers. The company said it now has 12.3 million subscribers.

Another factor that affected results was an increase in the costs of acquiring subscribers. EchoStar said subscriber acquisition costs rose 8 percent, driven mainly by the new terms of its alliance with phone giant AT&T. As part of the new pact, EchoStar now shoulders the costs of acquiring customers obtained through the AT&T relationship, whereas the previous partnership had AT&T footing that bill.